"I'm more excited about the supply chain enabler side of it, that's actually building some of that tech to help brokers get more efficient, help shippers get more efficient, and help carriers get more efficient."
Outdated Regulations Should Be Left in the Past
Guest Contribution by Anne Reinke, CEO of TIA: 'Outdated Regulations Should Be Left in the Past'
The Federal Motor Carrier Safety Administration (FMCSA) has set a date of October 2024 for a rulemaking to determine whether rules on truck broker contracting requirements should be amended. FMCSA is responding to petitions filed by owner operator groups that would expand upon a regulation from the 1980s by mandating brokers share pricing details with carriers electronically 48-hours after delivery and restricting contracts that waive carriers' rights to view transactions they are not a party to. The advocates have provided a variety of reasons, depending on the year, as to why this is needed, but what they are really after is a governmental thumb on the scale in their favor in contract negotiations.
The FMCSA’s regulation was crafted in the 1980s when carriers paid brokers a commission for finding them a shipper. The FMCSA wanted to ensure that the shipper and the broker were not the same entity and thus getting paid twice. Nowadays, the shipper pays the broker in one transaction and the broker pays the carrier in another transaction – a complete reversal of the 1980s relationship. Needless to say, this regulation is outdated and no longer serves its intended purpose in the modern market
One of the fundamental tenets of a free-market economy is the ability for businesses to negotiate contracts freely and confidentially. These contracts provide not only commercial terms, but also closely-guarded competitive information. Indeed, Congress reaffirmed the importance of contracts by deeming them “trade secrets” in the “Defend Trade Secrets Act” of 2016. Public policy is clear that private contracts are meant to stay private. Not only does a carrier not have a reason to see a private contract it is not privy to, the carrier does not have the right to see it.
Let’s not forget that the FMCSA’s central mission is safety. It has neither the expertise nor the ability to choose winners and losers in a private contract negotiation. The trucking industry is vast and complex, with countless transactions occurring daily. Further, the prevailing rates paid to a carrier based on lane, commodity and mileage are by and large publicly available on a variety of platforms, such as electronic load boards. There are 27,000 brokers. There are 500,000 carriers. If a carrier does not like what a broker is offering him or her, he can check with the load boards and find thousands of other potential loads the carrier would prefer to haul. The carriers all know this. They want access to the contract between the shipper and the broker, plain and simple. A safety agency should not determine whether a broker paid a carrier a fair rate in a diffuse and highly rate-visible marketplace. It is contrary to its mission and completely unnecessary.
We suggest the FMCSA spends its time and energies on safety-critical issues. For example, undertaking a rulemaking on how best to determine the safety rating of carriers – this is a great initiative by the agency, and incredibly important to the safety on the nation’s highways. Or the FMCSA could tackle the enormous uptick in fraud, which threatens the safety and security of the nation’s supply chain. In the past year, supply chain fraud has surged by a staggering 675%, costing the nation over $800 million annually.
One final point: the freight marketplace is in a slump. The high volumes, and vanishingly small capacity during the pandemic (which, incidentally, drove motor carrier rates up to staggering highs) are over, and both carriers AND brokers are impacted (the announcement of various brokers either declaring bankruptcy or shuttering altogether validates this tough marketplace). This slump is neither the fault of the carrier, nor of the broker. It is the economic cycle at work. Brokers need carriers. Carriers need brokers. Let’s work together to make each other successful, rather than blame each other for what we can’t control.